Defense trumps taxes in N.H.

New Hampshire's a libertarian-leaning, tax-hating, small-government swing state. But there’s something more important to Granite State voters than all that dogma: defense jobs.

The state’s U.S. senators, Republican Kelly Ayotte and Democrat Jeanne Shaheen, called this week for a “balanced, bipartisan deficit-reduction package” to replace the automatic sequestration cuts Congress and the president put in place last year when they cut a deal to raise the nation’s debt limit.

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The language is carefully coded Washington speak: “Balanced” is the word Obama and others use to say that they think tax hikes should be part of the mix for any law that alters the $109 billion in automatic cuts, split evenly between defense and domestic programs, set to take effect in early 2013.

Like other Republicans who have embraced a tax-side solution to stopping sequestration, Ayotte says she wants to close “loopholes” in the tax code to raise the necessary money and does not support raising tax rates.

While many Republicans, including House Speaker John Boehner, have been willing to discuss closing "loopholes" as part of a larger tax reform plan that would lower rates while applying taxes to more people, they have shied away from giving Democrats that concession in order to stave off the Pentagon cuts. What Ayotte and Shaheen and their colleagues propose would take a bargaining chip off the table for the GOP and make it harder to enact a tax reform plan that lowers rates for corporations across the board.

So that still puts Ayotte, a top surrogate for Mitt Romney, a bit closer to Obama’s position than to Republican Party orthodoxy.

It also comes at a time when national polls show the public has shifted on taxes, and that could be a major factor in the outcome in swing states like New Hampshire. Over the summer, Romney held a lead on the question of who would better handle taxes. But Obama more than reversed it, seizing a 51 percent to 42 percent advantage in a CBS/New York Times poll taken earlier this month.

Romney and his running mate, Paul Ryan, have been hammering Obama on the campaign trail for agreeing to defense cuts that they — and even Defense Secretary Leon Panetta — say would be devastating to national security.

“You keep going around the world, it is still a troubled and dangerous world, and the idea of cutting our military commitment by a trillion dollars over this decade is unthinkable and devastating, and when I become president of the United States, we will stop it,” Romney said at an American Legion hall in Springfield, Va., on Thursday.

Ryan voted for the same bill that Obama signed, but he has since led House Republicans in passing a measure that would replace the sequester by slashing domestic programs even further. He has suggested that such a bill could be quickly delivered to a President Romney’s desk for a signature.

But that’s anathema to Democrats, who seem increasingly likely to hold onto power in the Senate.

“The bill relies entirely on spending cuts that impose a particular burden on the middle class and the most vulnerable among us, while doing nothing to raise revenue from the most affluent,” the White House Office of Management and Budget wrote in threatening to veto the bill in the unlikely event that it made it to the president’s desk. “Rather than pursuing a comprehensive, balanced deficit reduction package to replace the sequester, [the bill] undermines the intent of the [Budget Control Act] to bring both sides to compromise by proposing a short-term, one-sided solution.”

Republican defense hawks in both chambers are looking for ways to thread the needle — to collect taxes from more Americans and corporations, rather than raising rates, to stave off the defense cuts.